When shopping for a credit card, there’s certainly no shortage of options. Depending on your financial situation, buying habits, and intended use, any number of card types could suit your needs. Frequent travellers love the perks and savings associated with travel and lifestyle cards, while those looking to crush their debt can take advantage of the temporary low-interest rates and waived fees offered by balance transfer cards.
In August of 2021, we conducted a survey of 1527 Canadians, asking them about their attitudes and behaviours regarding their credit. What we discovered was that credit users nationwide seemed to vastly prefer rewards credit cards to other types available, with nearly eight-in-ten (78%) saying they most frequently use a credit card that offers some kind of reward, and 61% of those who researched new credit cards in the last year specifically interested in unique rewards and benefits.
So why are rewards cards so popular? And how do you get the most out of them?
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3 benefits of rewards cards in Canada
Cash back rewards
Of those we surveyed who use rewards cards, 54% claimed to prefer cash back over other types.
Cash back rewards cards are popular for a reason. Users can earn a percentage of cash back when they make purchases with the card, collecting up to a certain limit (or sometimes no limit) and redeeming the money in a few different ways, such as a deposit into a savings account or a gift card purchase. They typically offer more simplicity than a complicated point-redemption system, with users being able to see directly how much they’ve earned without having to do any calculations. Often, cash back rewards can also be used to pay down an existing balance on your card, which sometimes isn’t the case for rewards-points cards that have stricter rules around redemption.
Some cards (like Tangerine’s Money-Back Credit Card) will even allow you to earn a higher rate of cash back in select categories like groceries or gas, giving extra value to those whose credit card spending tends to habitually fall into the same few areas.
For those constantly on the go, whether for personal travel or business, a travel rewards card can often be a great choice. Of the rewards card users surveyed, 23% preferred the perks and points gathered through travel rewards.
Unlike cash back, travel cards allow you to earn points for every dollar you spend on the card. The value of these points differ from card to card, but you can use them to offset the cost of travel expenses or purchase gift cards, merchandise, and more. And, if you specifically use the card for travel costs like accommodation and airfare, you can often earn more points than usual per dollar. A good example is the TD First Class Visa Infinite, which lets you earn 9 points per dollar when you purchase hotel rooms or flights through Expedia for TD website as opposed to the 3 points per dollar you’d earn on all other transactions.
Some travel cards are associated with particular loyalty programs such as Aeroplan, Air Miles, or Marriott Bonvoy. These allow you to earn rewards or discounts if you make travel purchases at businesses that are partnered with your credit card. Oftentimes you can also take advantage of member perks such as free checked bags, airport lounge access, or a complimentary night at a hotel.
If you’re loyal to a particular retail chain, keeping a retail rewards card in your wallet can always come in handy. Of the rewards card users we asked, 25% said they most frequently used a credit card from their favourite store.
It’s not surprising that a number of Canadians love using retail rewards cards. If a large majority of your credit card purchases are for groceries, gas, and household items, it makes sense to carry a specific card that can maximize your savings in those categories. Rewards cards will allow you to earn points per dollar on purchases made with the card at the associated retail chain(s). You can collect these points over time until you have enough to take a pretty sizable chunk out of your bill the next time you’re out shopping. Many of these cards don’t offer a super-great point value for outside purchases, but that’s isn’t their main purpose. They exist to reward customer loyalty with big points per dollar every time you visit your favourite store.
The PC Financial Mastercard, for example, offers users 10 points per dollar on purchases made at any Loblaws-owned grocery chain, and a staggering 25 points per dollar spent at any Shoppers Drug Mart. If you routinely spend $500 per month on groceries, for example, you could earn enough to pay off half your monthly grocery costs in the first year alone.
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How to maximize your credit card rewards
Rewards cards aren’t very useful, however, if you don’t understand (or don’t care) about making the most of the cash back or points you’re earning. Our August survey found that, of those Canadians who have used a credit card in the past year, 54% have checked their reward points balance and only 31% have actually used their credit card rewards. Here’s a few tips on how to maximize the earning potential of your rewards card(s):
Keep on top of your rewards
The cash back and points you’ve accumulated from using your card won’t do you any good if you’re not keeping track of how much you have. Check up on your rewards total each month and, especially if your rewards don’t expire, decide at what point you will cash in on all that loyal spending you’ve been doing. Perhaps you’re planning a big vacation or a party where you’ll have to pick up lots of supplies. These are perfect opportunities to use your cash back or bonus points.
Stack your cards
If you’re an experienced credit user, you can benefit from “stacking” (or owning more than one of) rewards cards according to the particular benefits of each. For example, if one card has a high cash back percentage on things like dining out and entertainment, and another offers you great points on grocery purchases, you can use each according to its benefits and get more back than you would if you only used one card for everything. Just remember to keep track of your spending and statement due dates, as owning multiple cards can feel like a juggling act if you’re not responsible.
Combine your credit card with loyalty programs
Many rewards credit cards are co-branded with loyalty programs such as SCENE and Air Miles, but in some cases you can double your points by using your credit card alongside your regular loyalty customer account. For example, your PC Financial Mastercard will get you Optimum points from shopping at any PC-affiliated retailer, but if you’ve also downloaded weekly deals onto your PC Optimum account using their app, you can extra earn rewards points on top of the base points from your card when you purchase those featured products.
Use your rewards card for big purchases
This is true especially if the purchase lies within a category where you would receive a higher cash back rate or number of points per dollar. Taking the family out to a live event and dinner? If your rewards credit card card has high cash back for dining out and entertainment, reach for that instead of your debit card and reap the benefits. Just remember that it’s always a good practice to pay off large purchases on your credit card as soon as you can to avoid interest buildup.
Do credit card rewards expire?
While it's great to sit back and let your cashback or points accumulate, there's also things you need to do to make sure they don't disappear before you've had a chance to use them.
When it comes to airline or hotel-based programs such as Aeroplan, Air Miles, or Marriott Bonvoy, their rewards will typically expire if the account has been inactive for a period of 12-18 months. To avoid this, make sure you're taking some sort of account action at least once a year, even if you're not going to be using the card abroad. This could be something as simple as transferring, redeeming, or earning points. As long as it registers as activity to your provider, you'll be in the clear and your expiry deadline will reset.
In the case of regular credit cards, your rewards will usually remain untouched as long as your account is in good standing. So just make sure to avoid late or missed payments, and keep a regular eye out for any strange activity on your statements that could signify fraud.
How to redeem credit card rewards
General credit card rewards
With most rewards cards, you'll typically have the option of using your points toward an existing credit card statement or purchases made through an online portal. These can be anything from gift cards to merchandise to travel arrangements such as flights and hotels. The only drawback is that you're usually restricted to what's on offer by the provider. While many of these portals do offer quite a wide variety of purchase options, it's still not quite the same as having the freedom to spend anywhere you'd like.
Store credit card rewards
If you use store credit cards, you'll most likely be collecting points to redeem for a future purchase, whether in-store or online. This is usually done by scanning or inputting the information from your card. The store will confirm your point balance and give you the option of using some or all of your points towards your purchase.
In the case of cashback credit cards, things are a lot simpler as they don't feature any complicated point value system. As you make purchases on your card, you can watch your cashback balance grow, and you'll always be able to see exactly how much you've got to spend.
Cashback rewards are typically used towards paying off an existing card statement, but in some cases your bank may also allow you to deposit your cashback into a savings or chequing account owned by them (if you have one).
The bottom line
While Canadians seem to love rewards credit cards, there’s also a lot of missed potential when it comes to maximizing and redeeming those perks and bonuses. If you’re thinking about getting a rewards credit card, that’s a great decision! Read up on the different types of cards available, and use our tips above to make sure you’re getting the most out of your benefits. And if you’ve got any tips of your own, make sure to leave them in the comments below.
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Travel Points vs. Cash Back: Choose the Best Rewards Credit Card For You